October 31st, 2007

Stock Market

I call him Gamblor

The Fed meets again tomorrow afternoon.  The last time they met, everyone was expecting a 25 point rate cut.  When the Fed surprised Wall Street with a 50 point cut, the market went nuts.  This time around, again the consensus is for a 25 point cut.  I'm betting on more.

Last time around, I threw all of my available cash into the Nasdaq just prior to the announcement, which made me several thousand a few minutes later, but it is financials who stand to benefit the most from a Fed rate cut.  This time I've thrown my money into the ProShares Ultra Financials ETF (UYG).  It's a risky move (and it's already cost me $200), but if the Fed gives another 50 point cut, which some analysts think may happen, I could hit the jackpot.

Normally I'd stay waaaaaay away from the financial sector (I prefer tech, energy and materials), but this time is an exception.
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Stock Market

No harm, no foul, but no money either

The Fed went with a 25 point cut, which was pretty much what the market was expecting.  What they weren't expecting was that it wasn't a unanimous decision, one board member voted against the rate cut.  This, along with news of possible renewed inflation, sent the market into a tailspin for a half hour or so.

Unfortunately, I had an appointment at 2:00, 45 minutes after the Fed announcement, so I couldn't sit there all afternoon and monitor my stocks.  I'd purchased my shares of UYG at $54.50 a couple days ago and just before the announcement it had reached $55.46, a tidy little 1.8% increase.  Alas, after the Fed announcement, it crashed down to $53.46, a loss of about 1.9%.  I didn't want to sell at a loss, and I knew I wouldn't get home before the market closed, so I placed a limit sell order with a target of $54.55, which would basically pay for the commission fees, then got in my car and drove off.

As I pulled into town, I remembered Sirius offers the audio portion of CNBC, so I tuned to it.  The market had gone from being in the hole to being up 170 points!  I started kicking myself because I knew that it was too late to cancel my sell order; it would have gone through long before I could reach a place with a computer.  I was certain I'd missed out on thousands of dollars that I could have made had I issued a market-on-close sell order instead.

First thing I did when I got home was check the stock prices.  I was soooo relieved when I saw that the closing price was only $55.01, only 46 cents more than I'd sold it for.  It turned out I had been beating myself up all afternoon over just a few hundred dollars.

At least my other ETFs and mutual funds (mostly foreign) did exceptionally well.
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